Restaurant Delivery Business Holds Strong as In-Person Dining Returns

Restaurant Delivery Business Holds Strong as In-Person Dining Returns

Restaurant Delivery Business Holds Strong as In-Person Dining Returns

Restaurant Delivery Business Holds Strong as In-Person Dining Returns

OAKLAND, Calif. — Last fall, as the weather cooled and coronavirus cases began to rise, May Seto, the owner of Grand Lake Kitchen in Oakland, refurbished a used pizza oven and started a takeout and delivery pizza business out of an extra kitchen where she had cooked for catering and private events.

Now, one of Grand Lake’s two locations serves as a hub for couriers picking up the restaurant’s cafe fare and pizzas. Ms. Seto also has plans to rebuild the entryway at her other location to provide more space for the flocks of delivery drivers picking up food.

“We might rearrange the front of the restaurant a little bit, and keep delivery in mind as if it’s here to stay, because it is,” she said.

Delivery services like DoorDash and Uber Eats became a lifeline for businesses during the pandemic. Restaurants learned the logistics of dealing with them — rearranging kitchens and stockpiling takeout containers in abandoned dining rooms — and reluctantly accepted delivery fees that cut into their already thin profit margins.

Some of those changes are beginning to look like they may become permanent because consumers aren’t letting go of their newfound fondness for getting food delivered to their front doors. In a recent JD Power and Associates survey, 71 percent of consumers said they would continue to order delivery as much or more than they had during the pandemic.

In markets that reopened earlier than most places, like Florida and Texas, as well as Australia, DoorDash said it its order volume slipped about 20 percent from the height of the pandemic. Uber Eats also had dips as communities reopened, but its revenue still grew 230 percent annually in the first quarter of this year — a welcome respite from Uber’s slumping ride-hailing business.

Something similar is happening in places like San Francisco. As lockdown orders eased this spring, Laurie Thomas, the co-owner of two restaurants in the city, said deliveries declined. But as San Francisco began to more fully reopen in June, Ms. Thomas’s DoorDash orders climbed back up, and were just slightly lower than they had been during the pandemic.

“Delivery became a huge part of life during the pandemic,” said Ben Bleiman, the leader of the San Francisco Bar Owner Alliance. “The question is how much of that is here to stay and how much is going to leave.”

There is little question the pandemic was a boon to online delivery services. In the first quarter of the year, DoorDash processed 329 million orders, a quarterly record for the company and a 219 percent increase from the previous year, it said. DoorDash estimated that it would process $9.4 billion to $9.9 billion in orders during the second quarter of the year, after processing $9.9 billion in the first quarter.

If delivery is here to stay, restaurant groups are pressing for ways to deal with it financially. Ms. Thomas leads the Golden Gate Restaurant Association, an industry group that has lobbied to cap the fees charged by delivery companies, while allowing them to charge additional fees for marketing services. Early in the pandemic, many cities placed emergency caps on the fees that delivery companies could charge restaurants. But many of those orders are set to expire. If fees return to prepandemic levels, delivery will become unaffordable, business owners said.

Last week, San Francisco’s board of supervisors voted unanimously for a permanent cap on delivery fees, limiting them to 15 percent. Similar measures are under consideration in Chicago and other cities.

“We can’t have a system where people are being charged upwards of 30 percent of their sale to survive,” said Ahsha Safai, a board member who co-sponsored the legislation.

DoorDash and Uber Eats have responded to the emergency caps by revamping how restaurants pay for their services and tacking on local charges. In April, DoorDash gave restaurants the option to pay a 15 percent fee for basic services, and the option to pay higher fees for marketing and other services. In some cities, like Chicago, DoorDash charges customers a $1.50 “Chicago fee.” In Jersey City, which temporarily capped fees at 10 percent, Uber Eats added a $3 “temporary local fee.”

Christopher Payne, DoorDash’s president, said there were other ways that legislators could support restaurants, such as allowing outdoor dining and alcohol delivery to continue.

“Most restaurants want to meet customers where they want to be,” Mr. Payne said. “The reality is that customers want both occasions. They want to go in the restaurants and have the great experience they miss but they also want to get what they want at home.”

Even high-end restaurants that turned to takeout as a lifeline during the pandemic said they might keep it as a supplement to fine dining.

“There is a current excitement around a return to in-person dining, but we firmly believe that the long-term health of restaurants and other service businesses requires creativity and a diversity of revenue streams,” said Nick Kokonas, the co-owner of Alinea, a Chicago restaurant that offers fine dining experiences that can cost $210 to $415 per person.

During the pandemic, Alinea began offering to-go options at $35 per person, and Mr. Kokonas, who is also the chief executive of the restaurant software company Tock, said Alinea would expand its to-go offerings.

Genie Kwon and Tim Flores opened their Filipino cafe and bakery, Kasama, in Chicago last July. Delivery was not a part of their initial vision for the restaurant, but the pandemic changed their plans. They piled their bar with takeout containers and their dining room filled with couriers and customers picking up orders.

Ms. Kwon said she made a habit of letting new menu items sit for an hour before testing them, so she could be sure they would still taste good after being delivered. As coronavirus cases soared in the winter, she and Mr. Flores debated adding a dedicated window for couriers to pick up food, as a social-distancing measure. During storms, Ms. Kwon said, there were often not enough couriers to deliver orders, so she and Mr. Flores ended up making deliveries themselves.

Ms. Kwon said she hoped to reduce Kasama’s dependency on delivery, which she estimated made up 25 percent of her business during the pandemic, phasing it out over the next month or so to make room for in-person dining.

“At this point, we don’t have the space or the manpower to keep going with the volume of delivery we were doing,” she said. “We’ll probably keep the daytime how it is and then stop doing delivery for dinner.”

To make sure customers stick with them, DoorDash and Uber Eats have quickly expanded their delivery offerings. Along with hot meals, the companies are now delivering groceries, pet supplies, alcohol and dry goods, and nudging customers to add the new offerings to their carts when they order dinner.

“A lot of the Uber Eats users that were primarily using the app to order food are now moving and sticking to other parts of the business,” said Pierre-Dimitri Gore-Coty, the senior vice president for delivery at Uber.

Mr. Payne of DoorDash said, “One of the consistent trends has been that, as they get more convenience, consumer expectations go up, not down.”

He added, “The arc of wanting more convenience, more things delivered to you faster, it seems to only go in one direction.”


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